MARKET OVERVIEW:

Average per capita consumption of oils and fats in Bangladesh has increased steadily during the last decade accordingly to Oil World. Per capita consumption of oils and fats is now approaching 19 kgs. Both population growth and consumer power has contributed to this. Steady economic growth has been a boon for all in the oil and fats sector.

As expected, demand for processed food items has also grown dramatically at par with economic growth. Since local production potential of oilseeds is limited due to low land availability, dependence on import is guaranteed. Palm oil, soya bean oil and rapeseed/canola oil are the three main edibles oils consumed in the country as stated in the Table 1 below.

Table- 1: Yearwise Consumption Trend of Oils and Fats in Bangladesh:

In Million Tonnes

Year	2019	2018	2017	2016	2015
Soyabean Oil	1.24	1.02	0.98	0.80	0.70
Palm oil	1.64	1.63	1.44	1.40	1.30
Rapeseed/Canola Oil	0.11	0.13	0.15	0.17	0.14
Others	0.09	0.10	0.09	0.06	0.08
Total:	3.08	2.88	2.66	2.43	2.22

Source: Oil World Annual – 2020

Note:

1. Soyabean oil figures include the import quantity of CDSBO and the oil extracted locally from imported soyabean @ 18% oil extraction rate.
2. Rapeseed/canola oil figures include the oil extracted from locally produced mustard seeds @ 33% oil extraction rate and the oil obtained locally from imported rapeseed/canola seeds @ 38% oil extraction rate.
3. Others include Palm stearin, PKO and PKO products, PFAD/Acid Oil, palm oil-based fats, coconut oil, refined veg. oil and ghee      

MARKET POTENTIALS FOR PALM OIL:

Bangladesh consumes almost 85% of its oils and fats in liquid form. There are 3 major edible oils, such as palm oil, soyabean oil and rapeseed/mustard are consumed in the country, among which palm oil is the leading oil since 2003. Price competitiveness of palm oil makes its leadership inevitable. Major segment of the consumers comes from the lower and lower- middle income group who are very price sensitive. Besides, shortening/vanaspati Industries, food processing industries and HORECA sector are other loyal consuming sectors of palm oil in the country. Sector wise consumption pattern of palm oil in the country can be seen in Table – 2.  

Table – 2: Sectorwise Consumption Pattern of Palm Oil In the Country:

In Tonnes

SL. No.	Sector	Annual Uses
A.	Household consumption as cooking oil	700,000
B.	Shortening/Vanaspati Industries	450,000
C.	Food Processing Industries	200,000
D.	HORECA Sector which includes Hotel and Restaurant including Fast Food chain and street food vendors/eateries	200,000

Super olein, sold as cooking oil is very popular among the price conscious middle and lower-middle income consumers. Palm olein is mainly used by lower income group and food processing industries, shortening/vanaspati manufactures and HORECA sector. Processed food industries prefer palm olein because of its competitive price and as it assists long shelf life of their products. A projection on consumption trend of palm oil during 2020 to 2024 is furnished in the Table – 3.

Table 3: Projections for Palm Oil Consumption in Bangladesh: 2020 – 2024:

Year	2020	2021	2022	2023	2024
Palm Oil Consumption (‘000 MT)	1,200	1,650	1,750	1,900	2,000

  Source: MPOC Dhaka Office Projection

Note: 
Due to COVID – 19, consumption vis-à-vis import of palm oil in 2020 may experience a significant decline compared to 2019.

OPPORTUNITY FOR MALAYSIAN FDI:

Malaysian FDI in edible oil refining sector in Bangladesh could be a game changer in this sector. FDI could create easier opportunities for Malaysian investors and facilitate higher export of Malaysian goods including palm oil to Bangladesh.  Collateral benefits of such a development would add value to the supply chain of palm oil in midstream and downstream sectors including tank storage facilities, refining, packing and distribution. Moreover, FDI won’t just reduce /eliminate tariffs barriers, but also help to address other barriers.

Malaysian FDI would not only allow MPO’s market consolidation in Bangladesh, but also facilitate entry into the Indian market using South Asian Free Trade Agreement (SAFTA) guidelines.  Under this agreement, SAARC member countries are allowed to export commodities to any of the member countries at 50% reduced tariff than that of the prevailing tariff on the commodity in question. It may be mentioned that Govt. of Bangladesh has declared multiple facilities/inceptives for FDI. Major facilities/incentives are as follows:  

(a)   For FDI, there is no limitation pertaining to foreign equity participation, i.e. 100 percent foreign equity is allowed. Non-resident institutional or individual investors can make portfolio investments in stock exchanges in Bangladesh. Foreign investors or companies may obtain full working loans from local banks. The terms of such loans will be determined on the basis of bank-client relationship.

(b)   A foreign technician employed in foreign companies will not be subjected to personal tax up to 3 (three) years, and beyond that period his/ her personal income tax payment will be governed by the existence or non-existence of agreement on avoidance of double taxation with country of citizenship.

(c)    Full repatriation of capital invested from foreign sources will be allowed. Similarly, profits and dividend accruing to foreign investment may be transferred in full. If foreign investors reinvest their repatriable dividends and or retained earnings, those will be treated as new investment. Foreigners employed in Bangladesh are entitled to remit up to 50 percent of their salary and will enjoy facilities for full repatriation of their savings and retirement benefits.

(d)    Foreign entrepreneurs are, therefore, entitled to the same facilities as domestic entrepreneurs with respect to tax holiday, payment of royalty, technical know-how fees etc.

(e)    The process of issuing work permits to foreign experts on the recommendation of investing foreign companies or joint ventures will operate without any hindrance or restriction. Multiple entry visa” will be issued to prospective foreign investors for 3 years. In the case of experts,” multiple entry visa” will be issued for the whole tenure of their assignments.

(f)    Citizenship by investing a minimum of US $ 500,000 or by transferring US$ 1,000,000 to any recognised financial institution (Non-repatriable).

(g)   Permanent resident ship by investing a minimum of US$ 75,000 (non-repatriable).  

It is worthy to mention it here that Malaysian investors are already active in Bangladesh.According to Bangladesh Investment and Development Authority (BIDA), Bangladesh has received proposals worth US$ 1,717 million under Malaysian FDI/Joint venture during 2018-19 fiscal in the field of telecommunications, power generation, textile and financial sectors. Accordingly, Malaysian FDI in edible oil refining sector would open a new horizon and contribute greatly in increase of export of MPO in Bangladesh. Considering the potentials, Adani Wilmar Pte. Ltd., a Singapore based joint venture of Singapore and India, has decided to invest US$ 500 million in edible oil refining and seed crushing sector and applied for a land of about 100 acres in a special economic zone situated near the country’s main seaport at Chittagong.  

CONCLUSION:

Consumption of oils and fats, in general, is in growing trend in Bangladesh in pace with population growth and economic development resulting in higher purchasing power of the general consumers. Palm oil has benefited from aforesaid trend of growth of consumption oils and fats.  

In 2019 total import consumption of oil and fats was about 3 million tones, with palm oil’s share of 1.64 million tonnes (53%). However, due to COVID – 19, consumption vis-à-vis import of palm oil in 2020 may witness a significant decline compared to 2019.

Hopefully, consumption would pick up again starting from 2021 once the situation becomes normal. It is expected that in 2021, total consumption quantity of palm oil would reach about 1.65 million tonnes, which is about 5.77% more compared to 2019. A projection on consumption trend of palm oil in Bangladesh from 2020 to 2024 is furnished in the Table – 3. (posted above)

Prepared by Fakhrul Alam

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.